National-Oilwell: Like 'pickaxes to miners'

National-Oilwell Varco (NOV) is a provider of equipment and components used in oil and gas drilling and production operations, oilfield services, and supply chain integration services to the upstream oil and gas industry.

The firm is a leader not a follower. While other companies fight to claim the largest oil reserves, Indeed, the company is like the shrewd businessmen that sold "pickaxes to gold miners" during the Gold Rush.

The company supplies the oil drilling industry with rigs and other supplies essential to produce oil and natural gas. From beginning to end, the company is involved in the process and gets paid regardless of whether resources were discovered or not.

The company is the largest supplier of rig equipment with close to a 60% market share. Order for its rig technology exceeded $3 billion this past quarter, the second highest ever.

NOV doesn't simply sell a rig as a one-time fee and is out of the picture. The company remains an integral player in the maintenance and upkeep of the rig replacing parts and upgrading the equipment.

The company greatly benefits from wear and tear on the rig, which inevitably accumulates from being placed in very stressful conditions. NOV has as much as $12.9 billion in backlog from agreement and contracts for its services.

NOV recently acquired Robbins & Myers for $2.5 billion. By taking over its smaller rival, the company has further increased its dominance as the market leader in the industry.

The acquisition allows NOV to strengthen its position in other product lines such as blowout preventers (a crucial to safety machine to shut off a well in case of an emergency).

The company recognizes an opportunity to tighten its grip on other oil related industries…it has bolstered its portfolio through diversification further distancing itself from its competition.

The company has steadily increased its revenues over the past 10 years from $2 billion in 2003 to $20 billion this past year. It is sitting on $3.5 billion in cash. Its financial flexibility has allowed the company to engage in several acquisitions boasting its portfolio.

In addition, the company has used its favorable cash situation to implement a solid dividend payout over the last several years. The company announced a doubling of its dividend this past quarter. The company has paid out more than $1 billion in dividend over the past 4 years.